Size and Soft Budget Constraints
There is much evidence against the so-called "too big to fail" hypothesis in the case of bailouts to sub-national governments. We look at a model where districts of di_erent size provide local public goods with positive spillovers. Matching grants of a central government can induce socially-e_cient provision, but districts can still exploit the intervening central government by inducing direct _nancing. We show that the ability of a district to induce a bailout from the central government and district size are negatively correlated.
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| Length: | 36 pages |
| Date of creation: | Nov 2006 |
| Handle: | RePEc:ifr:wpaper:2006-13 |
| Contact details of provider: | Postal: Lexington, KY 40506-0027 Phone: (859) 257-5741 Fax: (859) 323-1937 Web page: http://www.ifigr.org/ More information through EDIRC
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References listed on IDEAS
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